Final Personal Finance test

debenture

a bond that is backed only by the reputation of the issuing corporation

bond indenture

a legal document that details all of the conditions relating to a bond issue

limit order

a request to buy or sell a stock at a specified price

line of credit

a short-term loan that is approved before the money is actually needed

interstate

without a valid will

speculative investment

A high-risk investment made in the hope of earning a relatively large profit in a short time

emergency fund

An amount of money you can obtain quickly in case of immediate need

will

The legal declaration of a person's mind as to the disposition of his or her property after death

contigent deferred sales load

a 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund

general obligation bond

a bond backed by the full faith, credit, and unlimited taxing power of the governement that issued it.

convertible bond

a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock

registered coupon bond

a bond that is registered for principal only, and not for interest

registered bond

a bond that is registered in the owner's name by the issuing company

revenue bond

a bond that is repaid from the income generated by the project it is designed to finance

zero-coupon bond

a bond that is sold at a price farr below its face value, makes no annual or semiannual interest payments, and is redeemed for its face value at maturity

total return

a calculation that includes the yearly dollar amount of dividend as well as any increase or decrease in the original purchase price of the investment

corporate bond

a corpoation's written pledge to repay a specified amount of money with interest

mortgage bond

a corporate bond secured by various assets of the issuing firm

earnings per share

a corporation's after-tax earnings divided by the number of outstanding shares of a firm's common stock

municipal bond

a debt security issued by a state or local government

estate planning

a definite plan for the administration and disposition of one's property during one's lifetime and at one's death

dividend

a distribution of money, stock, or other property that a corporation pays to stockholders

living will

a document that enables an individual, while well, to express the intention that life be allowed to end if her or she becomes terminally ill

codicil

a document that modifies provisions in an existing will

call feature

a feature that allows the corporation to call in, or buy, outstanding bonds from current bondholders before the maturity date

12b-1 fee

a fee that an investment company levies to defray the cost of advertising and marketing a mutual fund

investment bank

a financial firm that assists corporations in raising funds, usually by heloping to sell new security issue

trustee

a financially independent firm that acts as the bondholders' representative

exchangged-traded fund (ETF)

a fund that invest in the stocks or other securities contained in a specific stock orr securities index, and whose shares are traded on a securities exchange or over the counter

sinking fund

a fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue

family of funds

a group of mutual funds managed by investment company

primary market

a kmarket in which an investor purchases financial securities, via an investment bank or other representative, from the issuer of those securities

trust

a legal arrangement through wich one's assets are held by a trustee

power of attorney

a legal document authorizing someone to act on one's behalf

proxy

a legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rrights to some individual or individuals

account executive

a licensed individual who buys or sells securities for clients; also called a stockbroker

dollar cost averaging

a long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals

secondary market

a market for existing financial securities that are currently traded amount investors

securities exchange

a marketplace where member brokers who represent investors meet to buy and sell securities

load fund

a mutual fund in which investors pay a commission (as high as 8.5 percent) every time tehy purchase shares

no-load fund

a mutual fund in which the individual investor pays no sales charge

open-end fund

a mutual fund whose shares are issued and redeemed by the investment company at the request of investors

closed-end fund

a mutual fund whose shares are issued by an investment company only when the fund is organized

over the counter (OTC) market

a network of dealers who buy and sell the stocks of corpporations that are mot listed on a securities exchhange

guardian

a person who assumes responsibility for providing children with personal care and managing the deceased's estate for them

defined-contribution plan

a plan - profit sharing, money purchase, KEOGH, or 401k that probides and individual account for each participant; also called an individual account plan.

Keogh plan

a plan in which tax-deductible contributions fund the retirement of self-employed people and their employees; also called an H.R. 10 plan or a self-employed retirement plan

dividend reinvestment plan

a plan that allows current stockholders the option to reinvest or use their cash dividends to purchase stock of the corporation

direct investment plan

a plan that allows stockholders to purchase stock directly from a corporation without having to use an account executive or a brokerage firm

defined-benefit plan

a plan that specifies the benefits the employee will receive at the normal retirement age

401 k plan

a plan under which employees can defer current taxation on a portion on their salary; also called a salary-reduction plan

stock split

a procedure in which the shares of stock owned byy existing stockholders are divided into a large number of shares

turnover ratio

a ratio that measures the percentage of a fund's holdings that have changed or been replaced during a 12 month period of time

market order

a request to buy or sell a stock at the current market value

reinvestment plan

a service provided by an investment company in which shareholder income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund

individual retirement account (IRA)

a special account in which the emplyee set aside a portion of his or her income taxes are not paid on the principal or interest until money is withdrawn from the account

margin

a speculative technique whereby an investor borrows part of the money needed to buy a particular stock

preferred stock

a type of stock that gives the owner the advantage of receiving cash dividends before common stockholders ae paid any dividends

NASDAQ

an electronic marketplace for stocks issued by approximately 3,200 different companies

vesting

an employee's right to at least a portion of the benefits accrued under an employer pension plan, even if the employee leaves the company before retiring

mutual fund

an investment company that pools the money of many investors - its shareholders - to invest in a variety of securities

stop order

an order to sell a particular stock at the next available opportunity after its market price reaches a specified amount

serial bonds

bonds of a single issue that mature on differrent dates

specialist

buys or sells a particular stock in an effort to maintain an orderly market

current yield

determinded by dividing the yearly dollar amount of interest by the bond's current price

book value

determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock

estate

everything one owns

churning

excessive buying and selling of securities to generate commissions

maturity date

for a corporate bond, the date on which the corporation is the repay the borrowed money

equity financing

money received for the owners or from the sale of shares of ownership in a business

Initial public offering (IPO)

occurs when a corrpporation sells stock to the general public for the first time

selling short

selling stock that has been borrowed from a brokerage firm and must be replaced at a later date

executor

someone willing and able to perform the task involved in carrying out your will

liquidity

the ability to buy or sell an investment quickly without substantially affecting the investment's value

expense ratio

the amount the investors pay for all of a mutual fund's management fees and operating costs

net asset value (NAV)

the current market value of the securities contained in the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding

record date

the date on which a stockholderr must be registered on the corporation's books in order to receive dividend payments

income dividends

the earrnings a fund pays to shareholders from its dividend and interest income

probate

the legal procedure of proving a valid or invalid will

common stock

the most basic form of corporate ownership

capital gain distributions

the payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio

price-earnings (PE) ratio

the price of a share of stock divided by the corporation's earnings per share of stock

asset allocation

the process of spreading you assets among several different types of investments to lessen risk

yeild

the rate of return earned by an investor who holds a bond for a stated period of time

option

the right to buy or sell a stock at a predetermined price during a specified period of time

government bond

the written pledge of a government or a municipality to repay a specified sum of money, along with interest

dividend yield

the yearly dollar amount of dividend generated by an investment divided by the investment's current price per share